Cathie Wood just purchased a bunch of Peloton (NASDAQ:PTON) shares after PTON stock crumbled from $125 in late July to below $90 in late September. This stock is at the lowest level its been at since its recall issues earlier this year. And this is as low as it gets.
As such, we think you should follow Cathie’s lead and buy the dip.
For one, although there are major demand headwinds in a post-Covid world, those headwinds have begun to exhaust themselves.
Folks have spent their pent-up demand going out and doing things. Behavior will normalize going forward.
And that means more bike usage, more tread usage and more app usage. In fact, web traffic data and app download volume corroborate this — both bottomed out recently but have since resumed upward trajectories.
We think we’re in the first inning of a new uptrend in usage for Peloton. As folks return to the office, school or elsewhere, they’ll once again be limited in their time spent at home. And this time limit will reinforce the on-demand value of Peloton’s workout equipment and app.
Another boon for Peloton’s business will be its private label merchandise line. Peloton has been selling merch since 2014, but until now that apparel has been made possible via collaborations with other companies.
Peloton has created a community around its products with very strong brand equity and engagement.
The fitness teachers, for example, are basically just super influencers. One of them is currently on the gameshow Dancing With the Stars. People want to wear Peloton clothes, and they’re willing to pay up for them. And they’ll buy a lot of them. After all, workout clothes get dirty quickly — so it pays to buy a bunch.
We see a huge upside for the merchandise business.
The Bottom Line on PTON Stock
Add to that the recall issue (which is in the rear-view mirror), the return of the Peloton Tread and price cuts, and we’ll soon see Peloton make its way to more households than ever before.
And we expect these households to possibly even adopt multiple workout devices, which they’ll then use while wearing their new Peloton apparel.
All in all, there is a lot of good stuff happening here.
The stock is trading pretty cheap at around 6.4X trailing sales versus a 10X+ average sales multiple ever since Covid hit. Plus, the stock bottomed most recently around this same 6.4X trailing sales multiple. So we think there’s a great chance the stock bottoms here and resumes rallying soon.
Buy the dip with Cathie Wood and load up on PTON stock.
However, Peloton is but one of my top picks that will score investors big returns over the long haul … and it’s far from the only hypergrowth stock on my radar.
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On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.